Reliance Industries, Bharti Airtel to Share Telecom Equipment
Billionaire Mukesh Ambani’s Reliance Industries Ltd. (RIL) said it will jointly build and share telecommunications infrastructure with Bharti Airtel Ltd. (BHARTI), India’s No.1 mobile phone operator, to cut costs and hasten the debut of its Reliance Jio phone service.
The second pact between the Mumbai-based oil-to-retail conglomerate and Airtel will allow both companies to share resources, including optic fiber, submarine cable networks, towers and Internet broadband services, the companies said in an e-mailed statement yesterday. The deal is aimed at avoiding the duplication of infrastructure, they said.
“It is too early to conclude the benefits to either partner as the announcement is very broad, and there is still a lack of clarity on Reliance Jio’s launch date as well as strategy, said Urmil Shah, a Mumbai-based analyst at Kim Eng Securities Ltd., who has a ‘‘buy’’ rating on Airtel.
Reliance Industries spent 48 billion rupees ($787 million) buying nationwide broadband spectrum in 2010, marking Mukesh Ambani’s return to the telecommunications industry after a feud with his younger brother Anil Ambani had split their father’s business empire five years earlier. The latest deal signals Mukesh Ambani’s desire to accelerate the start of Reliance Jio Infocomm Ltd.
Earlier this year, Mukesh Ambani forged twin agreements valued at $2.31 billion with Anil to share Reliance Communications Ltd. (RCOM)’s towers and fiber-optic network. In April, Reliance Jio signed a pact to use New Delhi-based Bharti Airtel’s submarine cable connecting India and Singapore.
Reliance Communications is India’s No. 4 mobile-phone operator by subscribers.
It is unusual for Mukesh Ambani, who has built the world’s largest refining complex, to strike so many partnerships, Shah said. ‘‘Reliance has preferred to be an integrated supplier in its energy operations. Here, the company is looking to save on incurring capex and has opted for an asset-light model,” he said. ’’This should help generating a better return-on-equity.’’
Reliance Industries hasn’t specified when Reliance Jio will begin to offer services.
Mukesh Ambani told Reliance Industries shareholders in June that he intends to more than triple Reliance Jio’s workforce to 10,000 and spend $26 billion over three years across all of Reliance Industries.
When Reliance Jio does start operating, it’s not likely to cause a recurrence of the “competitive intensity” that marked the Ambanis’ initial foray into mobile-phone service more than a decade ago, Shah said.
The Reliance group first provided mobile services in 2002, before the split between Mukesh and Anil, and slashed call prices, triggering a tariff war among service providers that lasted almost a decade.
Reliance Industries shares rose 0.7 to 884.65 rupees in Mumbai yesterday. They have climbed 5.4 percent this year. Bharti Airtel fell 0.3 percent to 335.25 rupees. The stock has climbed 5.7 percent this year.
The Reliance Industries-Bharti Airtel agreement was announced after the close of trading yesterday.
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